Dietrick Corporation borrowed $30,000 from its major shareholder

Dietrick Corporation borrowed $30,000 from its major shareholder, the president of the company, at an annual interest rate of 12%.

1. Assuming simple interest,

(a) How much will Dietrick have to pay to settle its obligation if the loan is to be repaid in 12 months?

(b) How much of the payment is interest?

(c) How much will Dietrick have to pay if the loan is due in 18 months?

2. If the loan is paid off in 18 months and interest is compounded annually, how much will the company have to pay?

3. Compare the answers for (1c) and (2) and explain why they differ.


Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...

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